These are cases for certiorari
and prohibition, challenging the constitutionality and validity of
Administrative Order Nos. 29 and 268 on various grounds.

The facts in G.R. Nos. 109406,
110642, 111494, and 112056 are undisputed, to wit:

Petitioners are officials and
employees of several government departments and agencies who were paid
incentive benefits for the year 1992,pursuant to Executive Order No. 292[1](“EO 292”), otherwise known as the
Administrative Code of 1987, and the Omnibus Rules Implementing Book V[2]of EO 292.On
January 19, 1993, then President Fidel V. Ramos (“President Ramos”)
issued Administrative Order No. 29 (“AO 29”) authorizing the grant of
productivity incentive benefits for the year 1992 in the maximum amount of P1,000.00[3] and reiterating the prohibition[4] under Section 7[5]of Administrative Order No. 268 (“AO 268”),
enjoining the grant of productivity incentive benefits without prior approval
of the President.Section 4 of AO 29
directed “[a]ll departments, offices and agencies which authorized payment of
CY 1992 Productivity Incentive Bonus in excess of the amount authorized under
Section 1 hereof [arehereby directed]
to immediately cause the return/refundof the excess within a period of six months to commence fifteen (15)
days after the issuance of this Order.”In compliance therewith, the heads of the departments or agencies of the
government concerned, who are the herein respondents, caused the deduction from
petitioners’ salaries or allowances of theamounts needed to cover the alleged overpayments.To prevent the respondents from making
further deductions from their salaries or allowances, the petitioners have come
before this Court to seek relief.

In G.R. No. 119597, the factsare different but the petition poses a
common issue with the other consolidated cases. The petitioner, Association of
Dedicated Employees of the Philippine Tourism Authority (“ADEPT”), is
anassociation of employees of the
Philippine Tourism Authority (“PTA”) who were granted productivity
incentive bonus for calendar year 1992 pursuant toRepublic ActNo. 6971 (“RA
6971”), otherwise known as the Productivity Incentives Act of 1990.Subject bonus was, however, disallowed by
the Corporate Auditor on the ground that it was “prohibited under
Administrative Order No. 29 dated January 19, 1993.”[6] The disallowance of the bonus in question was finally
brought on appeal to the Commission on Audit (COA) which denied the appeal in
its Decision[7]of March 6, 1995, ratiocinating, thus:

“xxx Firstly, the provisions of RA #6971 insofar as the coverage is
concerned, refer to business enterprises including government owned and/or
controlled corporations performing proprietary functions.

“All business enterprises, with or without existing duly certified
labor organizations, including government owned and/or controlled corporations
performing proprietary functions which are established solely for business or
profit and accordingly excluding those created, maintained or acquired in
pursuance of a policy of the State enunciated in the Constitution, or by law
and those whose officers and employees are covered by the Civil Service.(underscoring supplied)

The PTrA is a GOCC created in pursuance of
a policy of the State.Section 9 of
Presidential DecreeNo. 189 states
that “To implement the policies and program of the Department (Dept. of
Tourism), there is hereby created a Philippine Tourism Authority, xxx.”Likewise, Section 21 of the same decree
provides that “All officials and employees of the Authority, xxx, shall be
subject to Civil Service Law, rules and regulations, and the coverage of the
Wage and Position Classification Office.”

Furthermore, although Supplemental Rules and Regulations
implementing R.A. #6971 was issued only on December 27, 1991, the law itself is
clear that it pertains to private business enterprises whose employees are
covered by the Labor Code of the Philippines, as mentioned in the following
provisions:

“Section 5. Labor Management Committee. xxx that at the request of
any party to the negotiation, the National Wages and Productivity Commission of
the Department of Labor and Employment shall provide the necessary studies,
xxx.”

“Section 8. Notification. -A business enterprise which adopts a productivity incentive program
shall submit copies of the same to the National Wages and Productivity
Commission and to the Bureau of Internal Revenue for their information and
record.”

“Section 9. Disputes and Grievances. -Whenever disputes, grievances, or other matters arise from the
interpretation or implementation of the productivity incentive program, xxx may
seek the assistance of the National Conciliation and Mediation Board of the
Department of Labor and Employment for such purpose. xxx”

Therefore, considering the foregoing, the PTrA is within the
“exclusion” provision of the Implementing Rules of RA #6971 and so, it (PTrA)
does not fall within its coverage as being entitled to the productivity
incentive bonus under RA #6971.

Secondly, Administrative Order No. 29 which is the basis for the
grant of the productivity incentive bonus/benefits for CY 1992 also expressly
provides “prohibiting payments of similar benefits in future years unless duly
authorized by the President.”

Thirdly, the disallowance of the Auditor, PTrA has already been
resolved when this Commission circularized thru COA Memorandum #92-758 dated
April 3, 1992 the Supplemental to Rules Implementing RA 6971 otherwise known as
the “Productivity Incentives Act of 1990.” xxx

Lastly, considering the title of RA #6971, i.e. “An Act to
encourage productivity and maintain industrial peace by providing incentives to
both labor and capital”, and its implementing rules and regulations prepared by
the Department of Labor and Employment and the Department of Finance, this
Office concludes that said law/regulation pertains to agencies in the private
sector whose employees are covered by the Labor Code.”

With the
denial of its appeal, petitioner found its way here via the petition in G.R.
No. 119597, to seek relief from the aforesaid decision ofCOA.

We will first resolve the issue on
the applicability ofRA 6971 to petitioner
ADEPT in G.R. No. 119597 before passing upon the constitutionality or validity
of Administrative Orders29 and 268.

Section 3 of RA 6971,reads:

“SECTION 3.Coverage.This Act shall apply to all business
enterprises with or without existing and duly recognized or certified labor
organizations, including government-owned and controlled corporations
performing proprietary functions.It shall cover all employees and workers including casual, regular,
supervisory and managerial employees.”(underscoring ours)

Pursuant
to Section 10[8] of RA 6971, the Secretary of Labor andSecretary of Finance issued Supplemental
Rules to Implement the said law,as
follows:

(a) All business enterprises with or without existing duly
certified labor organizations, including government-owned and controlled
corporations performing proprietary functions which are established solely
for business or profit or gain and accordingly excluding those created,
maintained or acquired in pursuance of a policy of the state, enunciated in the
Constitution or by law, and those whose officers and employees are covered by
the Civil Service. (underscoring ours)

xxx”

Petitioner contends that the PTA
is a government-owned and controlled corporation performing proprietary
function, and therefore the Secretary of Labor and Employment and Secretary of
Finance exceeded their authority in issuing the aforestated Supplemental Rules
Implementing RA 6971.

Government-owned and controlled
corporations may perform governmental or proprietary functions or both,
depending on the purpose for which they have been created.If the purpose is to obtain special
corporate benefits or earn pecuniary profit, the function is proprietary.If it is in the interest of health, safety
and for the advancement of public good and welfare, affecting the public in
general, the function is governmental.[9] Powers classified as “proprietary” are those intended
for private advantage and benefit.[10]

The PTA was established by
Presidential Decree No. 189, as amended by Presidential Decree No. 564 (“PD
564”).

a.
To assist the Department make a comprehensive survey of the physical and
natural tourism resources of the Philippines; to establish the order of
priority for development of said areas; to recommend to the President the
proclamation of a tourist zone; and to define and fix the boundaries of the
zone;

b.
To formulate a development plan for each zone;

c.
To submit to the President through the National Economic and Development
Authority for review and approval all development plans before the same are
enforcedor implemented;

d.
To submit to the President an Annual Progress Report;

e.To
assist the Department to determine the additional capacity requirements for
various tourist facilities and services; to prepare a ten-year Tourism Priorities
Plan; to update annually the ten year Tourism Priorities Plan.

f.To
gather, collate and analyze statistical data and other pertinent information
for the effective implementation of PD 564.

2.Acquisition and
disposition of lands and other assets for tourist zone purposes

a. To
acquire possession and ownership of all lands transferred to it from other
government corporations and institutions and any land having tourism potential
and earmarked in the Tourism Priorities Plans for intensive development into a
tourist zone or as a part thereof, subject to the approval of the President.

b.To
acquire by purchase, by negotiation or by condemnation proceedings any private
land within and without the tourist zones for any of the following reasons: (a)
consolidation of lands for tourist zone development purposes, (b) prevention of
land speculation in areas declared as tourist zones, (c) acquisition of right
of way to the zones, (d) protection of water shed areas and natural assets with
tourism value, and (e) for any other purpose expressly authorized under PD 564.

c.For
the purpose of providing land acquisition assistance to registered tourism
enterprises, to sell, subdivide, resell, lease, sublease, rent out, or
otherwise, to said registered tourism enterprises under sufficiently soft terms
for use specifically in the development of hotels, recreational facilities, and
other tourist services.

d. To
develop and/or subdivide any land in its name or undertake condominium projects
thereon, and sell subdivision lots or condominium units to private persons for
investment purposes.

e.To
take over or transfer to a registered tourism enterprise in accordance with law
any lease on foreshore areaswithin a
tourist zone or adjacent thereto, in cases said areas are not being utilized in
accordance with the PTA’s approved zone development plan and wherein the lessee
concerned does not agree to conform accordingly.

f. To
arrange for the reclamation of any land adjacent to or adjoining a tourist zone
in coordination with appropriate government agencies.

3. Infrastructure development for tourist zone purposes

a. To
contract, supervise and pay for infrastructure works and civil works within a
tourist zone owned and operated by the PTA.

b.To
coordinate with appropriate government agencies the development of
infrastructure requirements supporting a tourist zone.

c. To
take water from any public stream, river, creek, lake, spring, or waterfall and
to alter, straighten, obstruct or increase the flow of water in streams.

4. Zone administration and control

a.
To formulate and implement zoning regulations.

b.To
determine and regulate the enterprises to be established within a tourist zone.

c.To
ensure, through the proper authorities concerned, the ecological preservation, maintenance
and/or rehabilitation of the common and the public areas within a tourist zone
and the environment thereof.

d.To
identify and recommend to the President the preservation and/or restoration of
national monuments or preserves; to arrange for the preservation and/or
restoration of the same with appropriate government agencies or with the
private sector or with the owners themselves of said tourist attractions; and
to identify and recommend to the appropriate authorities concerned the
declaration of tourist areas and attractions as national monuments and
preserves.

5. Project and investment promotions

a.To
identify, develop, invest in, own, manage and operate such projects as it may
deem to be vital for recreation and rest but not sufficiently attractive
economically for private investment.

b.To
construct hotel buildings and other tourist facilities within a tourist zone
and in turn lease such facilitiesto
registered tourism enterprises for operation, management and maintenance.

g. To identify, contact and assist in negotiations
of suitable partners for both local and foreign investors interested in
investment or participation in the tourism industry.

h.To
assist registered enterprises and prospective investors to have their papers
processed with dispatch by government offices.

7. Other powers and functions

a.To
engage or retain the services of financial, management, legal, technical,
and/or project consultants from the private or government sector.

b.To
have the power to succeed by its corporate name.

c.To
adopt, alter, and use a corporateseal.

d.To
sue and be sued under its corporate name.

e.To
enter into any contracts of any kind and description.

f.To
own or possess personal and/or real property.

g.To
make, adopt and enforce rules and regulations to execute its powers, duties and
functions.

h.To
purchase, hold, and alienate shares of stock or bonds of any corporation.

I.To
collect fees or charges as may be imposed under PD 564.

j.To
contract indebtedness and issue bonds.

k. To fix and collect rentals for the
lease, use or occupancy of lands, buildings, or other property owned or
administered by PTA.

l.To
do any and all acts and things necessary to carry out the purposes for which
the PTA is created.

Categorized in light of the
foregoing provisions of law in point, PTA’s governmental functions include the
first, third,fourth, andsixth of the aforesaid general
purposes.The second[13] and fifth general purposes fall under its proprietary
functions.

With respect to PTA’s specific
functions and powers, the first and fourth are governmental in nature
whilethefifth specific functions and powers are proprietary in
character.The second,third, sixth, and seventh specific functions
and powers can be considered partly-governmental and partly-proprietary, considering
that 2(a), 2(b), 2(c), 2(d), 2(e), 3(a), 6(c), 6(d), 6(e), 7(h), 7(j), and 7(k)
are proprietary functions while 2(f), 3(b), 3(c), 6(a), 6(b), 6(f), 6(g), 6(h),
7(a), 7(b), 7(c), 7(d), 7(f), 7(g), and 7(l) are governmental functions.The specific functions and powers treated in
7(e) and 7(i) may be classified either as proprietary or governmental,
depending on the circumstances under which they are exercised or performed.

The aforecited powers and
functions of PTA are predominantly governmental, principally geared towards the
development and promotion of tourism in the scenic Philippine archipelago.But it is irrefutable that PTA also performs
proprietary functions, as envisaged by its charter.

Reliance on the above analysis
ofthefunctions and powers of PTA does not suffice for the determination of
whether or not it is within the coverage of RA 6971.For us to resolve the issues raised here solely on the basis of
the classification of PTA’s powers and functions may lead to the rendition of judgment
repugnant to the legislative intent and to established doctrines, as well, such
as on the prohibition against government workers to strike.[14] Under RA 6971, the workers have the right to strike.

To ascertain whether PTA is within
the ambit of RA 6971, there is need to find out the legislative intent, and to
refer to other provisions of RA 6971 and other pertinent laws, that may aid the
Court in ruling on the right of officials and employees of PTA to receive
bonuses under RA 6971.

Petitioner cites an entryin the journal of the House of
Representatives to buttress its submission that PTA is within the coverage of
RA 6971, to wit:

“Chairman Veloso: The intent of including government-owned and
controlled corporations within the coverage of the Act is the recognition of
the principle that when government goes into business, it (divests) itself of
its immunity from suit and goes down to the level of ordinary private
enterprises and subjects itself to the ordinary laws of the land just like
ordinary private enterprises.Now, when
people work therefore in government-owned or controlled corporations, it is as
if they are also, just like in the private sector, entitled to all the benefits
of all laws that apply to workers in the private sector.In my view, even including the right to
organize, bargain....”VELOSO
(Bicameral Conference Committee on Labor and Employment, pp. 15-16)

After a careful study, the Court
is of the view, and so holds, that contrary to petitioner’s interpretation, the
government-owned and controlled corporations Mr. Chairman Veloso had in mind
were government-owned and controlled corporations incorporated under the
general corporation law.This is so
because only workers in private corporations and government-owned and
controlled corporations, incorporated under the general corporation law, have
the right to bargain (collectively).Those in government corporations with special charter, which are subject
to Civil Service Laws, have no right to bargain (collectively), except where
theterms and conditions of employment
are not fixed by law.[15] Their rights and duties are not comparable with those
in the private sector.

“Since the terms and conditions of government employment are fixed
by law, government workers cannot use the same weapons employed by workers in
the private sector to secure concessions from their employers.The principle behind labor unionism in
private industry is that industrial peace cannot be secured through compulsion
by law.Relations between private
employers and their employees rest on an essentially voluntary basis.Subject to the minimum requirements of wage
laws and other labor and welfare legislation, the terms and conditions of
employment in the unionized private sector are settled through the process of
collective bargaining.In government
employment, however, it is the legislature and, where properly given delegated
power, the administrative heads of government which fix the terms and
conditions of employment.And this is
effected through statutes or administrative circulars, rules, and regulations,
not through collective bargaining agreements.” (Alliance of Government
Workers v. Minister of Labor and Employment, 124 SCRA 1) (italics ours)

Government corporations may be
created by special charters or by incorporation under the general corporation
law.Those created by special charters
are governed by the Civil Service Law while those incorporated under the
general corporation law are governed by the Labor Code.[16]

The legislative intent to place
only government-owned and controlled corporations performing proprietary
functions under the coverage of RA 6971 is gleanable from the other provisions
of the law.For instance, section 2[17] of said law envisions “industrial peace and harmony”
and “to provide corresponding incentives to both labor and capital;” section 4[18] refers to “representatives of labor and management;”
section 5[19] mentions of “collective bargaining agent(s) of the
bargaining unit(s);” section 6[20] relates to “existing collective bargaining
agreements,” and “labor and management;” section 7[21] speaks of “strike or lockout;” and section 9[22] purports to “seek the assistance of the National
Conciliation and Mediation Board of the Department of Labor and Employment” and
“include the name(s) of the voluntary arbitrators or panel of voluntary
arbitrator.”All the aforecited
provisions of law apply only to private corporations and government-owned and
controlled corporations organized under the general corporation law. Only they
have collective bargaining agents, collective bargaining units, collective
bargaining agreements, and the right to strike or lockout.

To repeat, employees of government
corporations created by special charters haveneither the right to strike nor the right to bargain collectively, as
defined in the Labor Code.The case of Social
Security System Employees Association indicates the following remedy of
government workers not allowed to strike or bargain collectively, to wit:

“Government employees may, therefore, through their unions
or associations, either petition the Congress for the betterment of the terms
and conditions of employment which are within the ambit of legislation or
negotiate with the appropriate government agencies for the improvement of those
which are not fixed by law.If
there be any unresolved grievances, the dispute may be referred to the Public
Sector Labor-Management Council for appropriate action.But employees in the civil service may
not resort to strikes, walkouts and other temporary work stoppages, like
workers in the private sector, to pressure the Government to accede to their
demands.”(supra, footnote
14, p. 698; italics ours)

It is a rule in statutory
construction that every part of the statute must be interpreted with reference
to the context, i.e., that every part of the statute must be considered
together with the other parts, and kept subservient to the general intent of
the whole enactment.[23] The provisions of RA 6971, taken together, reveal the
legislative intent to include only government-owned and controlled corporations
performing proprietary functions within its coverage.

Every statute must be construed
and harmonized with other statutes as to form a uniform system of
jurisprudence.[24] We noteSection 1, Rule X of the Omnibus Rules Implementing Book V ofEO 292, which reads:

“SECTION 1. -Each department or agency of government, whether national or
local, including bureaus and agencies, state colleges and universities, and government
owned and controlled corporations with original charters, shall establish
its own Department or Agency Employee Suggestions and Incentives Award System
in accordance with these Rules and shall submit the same to the Commission for
approval.” (underscoring ours)

It is thus
evident that PTA, being a government-owned and controlled corporation with
original charter subject to Civil Service Law, Rules and Regulations,[25] is already within the scope of an incentives award
system under Section 1, Rule X of the Omnibus Rules Implementing EO 292 issued
by the Civil Service Commission (“Commission”). Since government-owned
and controlled corporations with original charters do have an incentive award
system, Congress enacted a law that would address the same concern of officials
and employees of government-owned and controlled corporations incorporated
under the general corporation law.

All things studiedly considered in
proper perspective, the Court finds no reversible error in the finding by
respondent Commission that PTA is not within the purview of RA 6971.As regards the promulgation of implementing
rules and regulations, it bears stressing thatthe “power of administrative officials to promulgaterulesinthe implementation ofthestatuteis necessarilylimitedtowhatisprovided for in the legislative enactment.”[26] In the case under scrutiny, the Supplementary Rules
ImplementingRA 6971 issued by the
Secretary of Labor and Employment and the Secretary of Financeaccord with the intendment and provisions of
RA 6971.Consequently, not being covered
by RA 6971, AO 29 applies to the petitioner.

We now tackle the common issue
posited by the consolidated petitions on the constitutionality of AO 29 and AO
268.

Petitioners contend and argue,
that:

I. AO 29 AND AO 268 ARE VIOLATIVE OF THE
PROVISIONS OF EO 292 AND, HENCE, NULL
AND VOID.

III.THE FORCED REFUND OF
INCENTIVE PAY IS AN UNCONSTITUTIONAL IMPAIRMENT OF A CONTRACTUAL OBLIGATION.

IV.ASSUMING, FOR THE SAKE OF
ARGUMENT ONLY, THAT THE GRANT OF PRODUCTIVITY INCENTIVE BENEFITS WAS INVALID,
THE SAME SHOULD BE THE PERSONAL LIABILITY OF OFFICIALS DIRECTLY RESPONSIBLE
THEREFOR IN ACCORDANCE WITH SECTION 9 OF AO 268.

Issued by the then President
Corazon Aquino (“President Aquino”) on July 25, 1987 in the exercise of
her legislative powers under the 1987 Constitution,[27] EO 292, or the Administrative Code of 1987,provided for the followingincentive award system:

“Sec. 31. Career and Personnel Development Plans. -Each department or agency shall prepare a
career and personnel development plan which shall be integrated into a national
plan by the Commission.Such career and
personnel development plans which shall include provisions on merit promotions,
performance evaluation, in-service training, including overseas and local
scholarships and training grants, job rotation, suggestions and incentive award
systems, and such other provisions for employees’ health, welfare, counseling,
recreation and similar services.”

“Sec. 35. Employee Suggestions and Incentive Award
System. -There shall be established a
government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated
by the Commission.

In accordance with rules, regulations, and standards
promulgated by the Commission, the President or the head of each department or
agency is authorized to incur whatever necessary expenses involved in the
honorary recognition of subordinate officers and employees of the government
who by their suggestions, inventions, superior accomplishment, and other
personal efforts contribute to the efficiency, economy, or other improvement of
government operations, or who perform such other extraordinary acts or services
in the public interest in connection with, or in relation to, their official
employment.”

“Sec. 36. Personnel Relations. -(1) It shall be the concern of the
Commission to provide leadership and assistance in developing employee
relations programs in the department or agencies.

(2) Every Secretary or head of agency shall take all
proper steps toward the creation of an atmosphere conducive to good
supervisor-employee relations and the improvement of employee morale.”

Pursuant
to the provision of Section 12(2),[28] Chapter 3, Book V of EO 292, the Commission adopted
and prescribed the Omnibus Rules Implementing Book V of EO 292 which, among
others, provide:

“Sec. 1. -Each department
or agency of government, whether national or local, including bureaus and
agencies, state colleges and universities, and government owned and controlled
corporations with original charters, shall establish its own Department or
Agency Employee Suggestions and Incentives Award System in accordance with
these Rules and shall submit the same to the Commission for approval.”

“Sec. 2. - The System is designed to encourage
creativity, innovativeness, efficiency, integrity and productivity in the
public service by recognizing and rewarding officials and employees,
individually or in groups, for their suggestions, inventions, superior
accomplishments, and other personal efforts which contribute to the efficiency,
economy, or other improvement in government operations, or for other
extraordinary acts of services in the public interest.

(c) Productivity Incentive which shall be given to an employee
or group of employees who has exceeded their targets or has incurred
incremental improvement over existing targets.”

On February 21, 1992,President Aquino issued AO 268 which granted
“each official and employee of the government the productivity incentive
benefits in a maximum amount equivalent to thirty percent (30%)of his one (1) month basic salary but in no
case shall such amount be less than two thousand pesos (P2,000.00),”[29] for those who have rendered at least one year of
service as of December 31, 1991.[30] Said AO carried the prohibition, provided in Section
7 thereof, which reads:

“SECTION 7.The productivity incentive benefits herein authorized shall be
granted only for Calendar Year 1991.Accordingly, all heads of agencies, including the governing boards of
government-owned or -controlled corporations and financial institutions, are
hereby strictly prohibited from authorizing/granting productivity incentive
benefits or other allowances of similar nature for Calendar Year 1992 and future
years pending the result of a comprehensive study being undertaken by the
Office of the Presidentin coordination
with the Civil Service Commission and the Department of Budget and Management
on the matter.

The formulation of the necessary implementing guidelines
for Executive Order No. 486 dated 8 November 1991 establishing a
performance-based incentive system for government-owned or -controlled
corporations shall likewise be included in the comprehensive study referred to
in the preceding paragraph.”

On January 19, 1993, President
Ramos issued AO 29 which granted productivity incentive benefits to government
employees in the maximum amount of P1,000.00[31] for the calendar year 1992 but reiterated the
proscription under Section 7 of AO 268, thus:

“SECTION 2.The
prohibition prescribed under Section 7 of Administrative Order No. 268 is
hereby reiterated.Accordingly, all
heads of government offices/agencies, including government-owned and/or
controlled corporations, as well as their respective governing boards are
hereby enjoined and prohibited from authorizing/granting Productivity Incentive
Benefits or any and all similar forms of allowances/benefits without prior
approval and authorization via Administrative Order by the Office of the
President.Henceforth, anyone found
violating any of the mandates in this Order, including all officials/employees
and the COA Auditor-in-Charge of such government office/agency found to have
taken part thereof, shall be accordingly and severely dealt with in accordance
with the applicable provisions of existing penal laws.

Consequently, all administrative authorizations to grant
any form of allowances/benefits and all forms of additional compensation
usually paid outside of the prescribed basic salary under R.A. No. 6758, the
Salary Standardization Law, that are inconsistent with the legislated policy on
the matter or are not covered by any legislative action are hereby revoked.

The implementation of Executive Order No. 486 dated
November 8, 1991, as amended by Executive Order No. 518 dated May 29, 1992, is
hereby deferred until a more comprehensive and equitable scheme for the grant
of the benefits that can be applied government-wide is formulated by the
Department of Budget and Management.”

Petitioners theorize that AO 29 and
AO 268 violate EO 292 and since the latter is a law, it prevails over executive
issuances.Petitioners likewise assert
that AO 29 and AO 268 encroach upon the constitutional authority of the Civil
Service Commission to adopt measures to strengthen the merit and rewards system
and to promulgate rules, regulations and standards governing the incentive
awards system of the civil service.

The Court is not impressed with
petitioners’ submission.AO 29 and AO
268 were issued in the valid exercise of presidential control overthe executive departments.

In establishing a Civil Service
Commission, the 1987 Constitution delineated its function, as follows:

“The Civil Service Commission, as the central personnel
agency of the Government, shall establish a career service and adopt measures
to promote morale, efficiency, integrity, responsiveness, progressiveness, and
courtesy in the civil service.It shall
strengthen the merit and rewards system, integrate all human resources
development programs for all levels and ranks, and institutionalize a
management climate conducive to public accountability.It shall submit to the President and the
Congress an annual report on its personnel programs.” (Section 3, Article
IX, B, 1987 Constitution)

The
Commission handles personnel matters of the government.As the central personnel agency of the
Government, it is tasked to formulate and establish a system of incentives and
rewards for officials and employees in the public sector, alike.

The functions of the Commission
have been decentralized to the different departments, offices, and agencies of
the government --

“SEC. 1. Declaration of Policy. -- The State shall
insure and promote the Constitutional mandate that appointments in the Civil
Service shall be made only according to merit and fitness; that the Civil
Service Commission, as the central personnel agency of the Government shall
establish a career service, adopt measures to promote morale, efficiency,
integrity, responsiveness, and courtesy in the civil service, strengthen the
merit and rewards system, integrate all human resources development programs
for all levels and ranks, and institutionalize a management climate conducive
to public accountability; that public office is a public trust and public
officers and employees must at all times be accountable to the people; and
that personnel functions shall be decentralized, delegating the corresponding
authority to the departments, offices and agencies where such functions can be
effectively performed.” (Section 1, Chapter I, Subtitle A, Title I, EO
292) (underscoring ours)

Specifically,
implementation of the Employee Suggestions and Incentive Award System has been
decentralized to the President or tothe head of each department or agency --

“Sec. 35. Employee Suggestions and Incentive Award
System. -There shall be established a
government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated
by the Commission.

In accordance with rules, regulations, and standards
promulgated by the Commission, the President or the head of each department
or agency is authorized to incur whatever necessary expenses involved in the
honorary recognition of subordinate officers and employees of the government
who by their suggestions, inventions, superior accomplishment, and other
personal efforts contribute to the efficiency, economy, or other improvement of
government operations, or who perform such other extraordinary acts or services
in the public interest in connection with, or in relation to, their official
employment.” (EO 292) (underscoring ours)

The President is the head of the
government.Governmental power and
authority are exercised and implemented through him.His power includes the control over executive departments --

“The president shall have control of all the executive
departments, bureaus, and offices.He
shall ensure that the laws be faithfully executed.” (Section 17, Article
VII, 1987 Constitution)

Control means “the power of an officer
to alter or modify or set aside what a subordinate officer had done in the
performance of his duties and to substitute the judgment of the former for that
of the latter.”[32] It has been held that “[t]he President can, by virtue
of his power of control, review, modify, alter or nullify any action, or
decision, of his subordinate in the executive departments, bureaus, or offices
under him.He can exercise this power motu proprio without need of any appeal from any party.”[33]

When the President issued AO 29
limiting the amount of incentive benefits, enjoining heads of government
agencies from granting incentive benefits without prior approval from him, and
directing the refund of the excess over the prescribed amount, the President
was just exercising his power of control over executive departments.This is decisively clear from the WHEREAS
CLAUSES of AO 268 and AO 29, to wit:

ADMINISTRATIVE ORDER NO.
268

“ xxx

WHEREAS, the productivity incentive benefits granted by the different
agencies are of varying amounts, causing dissension/demoralization on the part
of those who had received less and those who have not yet received any such
benefit, thereby defeating the purpose for which the same should be granted;
and

WHEREAS, there exists the need to regulate the grant of the
productivity incentive benefits or other similar allowances in conformity with
the policy on standardization of compensation pursuant to Republic Act No.
6758;

xxx.”

ADMINISTRATIVE ORDER NO.
29

“xxx

WHEREAS, the faithful implementation of statutes, including
the Administrative Code of 1987 and all laws governing all forms of additional
compensation and personnel benefits is a Constitutional prerogative vested in
the President of the Philippines under Section 17, Article VII of the 1987
Constitution;

WHEREAS, the Constitutional prerogative includes the
determination of the rates, the timing and schedule of payment, and final
authority to commit limited resources of government for the payment of personnel
incentives, cash awards, productivity bonus, and other forms of additional
compensation and fringe benefits;

WHEREAS, some government agencies have overlooked said
Constitutional prerogative and have unilaterally granted to their respective
officials and employees incentive awards;

WHEREAS, the Office of the President issued Administrative Order
No. 268, dated February 21, 1992, strictly prohibiting the grant of
Productivity Incentive Bonus or other allowances of similar nature for Calendar
Year 1992 and future years pending theissuance of the requisite authorization by the President;

WHEREAS, notwithstanding said prohibition some government
offices/agencies and government-owned and/or controlled corporations and
financial institutions have granted productivity incentive benefits in varying
nomenclature and amounts without the proper authorization/coordination with the
Office of the President;

WHEREAS, the unilateral and uncoordinated grant of productivity
incentive benefits gave rise to discontentment, dissatisfaction and
demoralization among government personnel who have received less or have not
received at all such benefits;

xxx.”

The
President issued subject Administrative Orders to regulate the grant of
productivity incentive benefits and to prevent discontentment, dissatisfaction
and demoralization among government personnel by committing limited resources
of government for the equal payment of incentives and awards.The President was onlyexercising his power of control by modifying
the acts of the respondents who granted incentive benefits to their employees
without appropriate clearance from the Office of the President, thereby
resulting in the uneven distribution of government resources.In the view of the President, respondents did
a mistake which had to be corrected.In
so acting, the President exercised a constitutionally-protected prerogative --

“The President’s duty to execute the law is of constitutional
origin.So, too, is his control of all
executive departments.Thus it is, that
department heads are men of his confidence.His is the power to appoint them; his, too, is the privilege to dismiss
them at pleasure.Naturally, he
controls and directs their acts.Implicit then is his authority to go over, confirm, modify or reverse
the action taken by his department secretaries.In this context, it may not be said that the President cannot
rule on the correctness of a decision of a department secretary.”(Lacson-Magallanes Co., Inc. v. Paño, 21
SCRA 898)

Neither can it be said that the
President encroached upon the authority of the Commission on Civil Service to
grant benefits to government personnel.AO 29 and AO 268 did not revoke the privilege of employees to receive
incentive benefits. The same merely regulated the grant and amount thereof.

Sound management and effective
utilization of financial resources of government are basically executive
functions,[34] not the Commission’s.Implicit is this recognition in EO 292,which states:

“Sec. 35. Employee Suggestions and Incentive Award System.
-There shall be established a
government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated
by the Commission.

In accordance with rules, regulations, and standards promulgated
by the Commission, the President or the head of each department or agencyis authorizedto incur whatever necessary expenses involved in the honorary
recognition of subordinate officers and employees of the government who by
their suggestions, inventions, superior accomplishment, and other personal
efforts contribute to the efficiency, economy, or other improvement of
government operations, or who perform such other extraordinary acts or services
in the public interest in connection with, or in relation to, their official
employment.” (Chapter 5, Subtitle A, Book V) (underscoring ours)

Conformably, it is “the President
or the head of each department or agency who is authorized to incur the
necessary expenses involved in the honorary recognition of subordinate officers
and employees of the government.”It is
not the duty of the Commission to fix the amount of the incentives.Such function belongs to the President or
his duly empowered alter ego.

Anent petitioners’ contention that
the forcible refund of incentive benefits is an unconstitutional impairment of
a contractual obligation, suffice it to state that “[n]ot all contracts entered
into by the government will operate as a waiver of its non-suability; distinction
must be made between its sovereign and proprietary acts (United States of
America v. Ruiz, 136 SCRA 487).”[35] The acts involved in this case are governmental.
Besides, the Court is in agreement with the Solicitor Generalthat the incentive pay or benefit is in the
nature of a bonus which is not a demandable or enforceable obligation.

It is understood that the
Judiciary, Civil Service Commission, Commission on Audit, Commission on
Elections, and Office of the Ombudsman, which enjoy fiscal autonomy, are not covered
by the amount fixed by the President.As explained in Bengzon vs. Drilon (208 SCRA 133):

“As envisioned in the Constitution, the fiscal autonomy enjoyed by
the Judiciary, the Civil Service Commission, the Commission on Audit, the
Commission on Elections, and the Office of the Ombudsman contemplates a
guarantee of full flexibility to allocate and utilize their resources with the
wisdom and dispatch that their needs require.It recognizes the power and authority to levy, assess and collect fees,
fix rates of compensation not exceeding the highest rates authorized by law for
compensation and pay plans of the government and allocate and disburse such
sums as may be provided by law or prescribed by them in the course of the
discharge of their functions.

“Fiscal autonomy means freedom from outside control.If the Supreme Court says it needs 100
typewriters but DBM rules we need only 10 typewriters and sends its
recommendations to Congress without even informing us, the autonomy given by
the Constitution becomes an empty and illusory platitude.

“The Judiciary, the Constitutional Commissions, and the Ombudsman
must have the independence and flexibility needed in the discharge of their
constitutional duties.The imposition
of restrictions and constraints on the manner the independent constitutional
offices allocate and utilize the funds appropriated for their operations is
anathema to fiscal autonomy and violative not only of the express mandate of
the Constitution but especially as regards the Supreme Court, of the
independence and separation of powers upon which the entire fabric of our
constitutional system is based.In the
interest of comity and cooperation, the Supreme Court, Constitutional
Commissions, and the Ombudsman have so far limited their objections to constant
reminders.We now agree with the
petitioners that this grant of autonomy should cease to be a meaningless
provision.”

Untenable is petitioners’
contention that the herein respondents be held personally liable for the refund
in question.Absent a showing of bad
faith or malice, public officers are not personally liable for damages
resulting from the performance of official duties.[36]

Every public official is entitled
to the presumption of good faith in the discharge of official duties.[37] Absent any showing of bad faith or malice, there is
likewise a presumption of regularity in the performance of official duties.[38]

In upholding the constitutionality
of AO 268 and AO 29, the Court reiteratesthe well-entrenched doctrine that “in interpreting statutes, that which
will avoid a finding of unconstitutionality is to be preferred.”[39]

Considering, however, that all the
parties here acted in good faith, we cannot countenance the refund of subject
incentive benefits for the year 1992, which amounts the petitioners have
already received.Indeed, no indicia
of bad faith can be detected under the attendant facts and circumstances.The officials and chiefs of offices
concerned disbursed such incentive benefits in the honest belief that the amounts
given were due to the recipients and the latter accepted the same with
gratitude, confident that they richly deserve such benefits.

WHEREFORE, the Petitions in G.R. Nos. 109406, 110642, 111494,
and 112056 areherebyDISMISSED, and as above ratiocinated,further deductions from thesalaries and allowances ofpetitioners are hereby ENJOINED.

In G.R. No. 119597, the assailed
Decision of respondent Commission on Audit is AFFIRMED.No pronouncement as to costs.

“Sec. 31. Career and Personnel Development Plans.
-Each department or agency shall
prepare a career and personnel development plan which shall be integrated into
a national plan by the Commission.Such
career and personnel development plans which shall include provisions on merit
promotions, performance evaluation, in-service training, including overseas and
local scholarships and training grants, job rotation, suggestions and incentive
award systems, and such other provisions for employees’ health, welfare,
counseling, recreation and similar services.”

“Sec. 35. Employee Suggestions and Incentive Award
System. -There shall be established a
government-wide employee suggestions and incentive awards system which shall be
administered under such rules, regulations, and standards as maybe promulgated
by the Commission.

In accordance with rules, regulations, and
standards promulgated by the Commission, the President or the head of each
department or agency is authorized to incur whatever necessary expenses
involved in the honorary recognition of subordinate officers and employees of
the government who by theirsuggestions, inventions, superior accomplishment, and other personal
efforts contribute to the efficiency, economy, or other improvement of
government operations, or who perform such other extraordinary acts or services
in the public interest in connection with, or in relation to, their official
employment.”

“Sec. 36. Personnel Relations. -(1) It shall be the concern of the Commission to provide leadership and
assistance in developing employee relations programs
in the department or agencies.

(2) Every Secretary or head of agency shall take
all proper steps toward the creation of an atmosphere conducive to good
supervisor-employee relations and the improvement of employee morale.”

[2] The applicable provisions are contained in
Sections 1, 2, and 7(c) of Rule X:

“Sec. 1. -Each department or agency ofgovernment, whether national
or local, including bureaus and agencies, state colleges and universities, and
government owned and controlled corporations with original charters, shall
establish its own Department or Agency Employee Suggestions and Incentives
Award System in accordance with these Rules and shall submit the same to the
Commission for approval.”

“Sec. 2. - The System is designed to encourage
creativity, innovativeness, efficiency, integrity and productivity in the
public service by recognizing and rewarding officials and employees,
individually or in groups, for their suggestions, inventions, superior
accomplishments, and other personal efforts which contribute to the efficiency,
economy, or other improvement in government operations, or for other
extraordinary acts of services in the public interest.

“(c) Productivity Incentive which shall be given to
an employee or group of employees who has exceeded their targets or has
incurred incremental improvement over existing targets.”

[3]“SECTION
1.All agencies of the National
Government, including government-owned and/or -controlled corporations and
government financial institutions, and local government units, are hereby
authorized to grant productivity incentive benefits in the maximum amount of
ONE THOUSAND PESOS (P1,000.00) each to their permanent and full-time
temporary and casual employees, including contractual personnel with employment
in the nature of a regular employee, who have rendered at least one (1) year of
service in the Government as of December 31, 1992.”

[4]“SECTION 2.The prohibition
prescribed under Section 7 of Administrative Order No. 268 is hereby
reiterated.Accordingly, all heads of
government offices/agencies, including government-owned and/or controlled
corporations, as well as their respective governing boards are hereby enjoined
and prohibited from authorizing/granting Productivity Incentive Benefits or any
and all similar forms of allowances/benefits without prior approval and
authorization via Administrative Order by the Office of the President.Henceforth, anyone found violating any of
the mandates in this Order, including all officials/employees and the COA
Auditor-in-Charge of such government office/agency found to have taken part
thereof, shall be accordingly and severely dealt with in accordance with the
applicable provisions of existing penal laws.

Consequently, all administrative authorizations to
grant any form of allowances/benefits and all forms of additional compensation
usually paid outside of the prescribed basic salary under R.A. No. 6758, the
Salary Standardization Law, that are inconsistent with the legislated policy on
the matter or are not covered by any legislative action are hereby revoked.

The implementation of Executive Order No. 486 dated
November 8, 1991, as amended by Executive Order No. 518 dated May 29, 1992, is
hereby deferred until a more comprehensive and equitable scheme for the grant
of the benefits that can be applied government-wide is formulated by the
Department of Budget and Management.”

[5]“SECTION
7.The productivity incentive benefits
herein authorized shall be granted only for Calendar Year 1991.Accordingly, all heads of agencies,
including the governing boards of government-owned or -controlled corporations
and financial institutions, are hereby strictly prohibited from
authorizing/granting productivity incentive benefits or other allowances of
similar nature for Calendar Year 1992 and future years pending the result of a
comprehensive study being undertaken by the Office of the Presidentin coordination with the Civil Service
Commission and the Department of Budget and Management on the matter.

The formulation of the necessary implementing
guidelines for Executive Order No. 486 dated 8 November 1991 establishing a
performance-based incentive system for government-owned or -controlled
corporations shall likewise be included in the comprehensive study referred to
in the preceding paragraph.”

[8]“SECTION
10.Rule Making Power - The
Secretary of Labor and Employment and the Secretary of Finance, after due
notice and hearing, shall jointly promulgate and issue within six (6) months
from the effectivity of this Act such rules and regulations as are necessary to
carry out the provisions hereof.”

“(b) Develop
tourist zones.-To promote the development into integrated resort complexes
of selected and well defined geographic areas with potential tourism value,
known otherwise as ‘tourist zones’, wherein optimum use of natural assets and
attractions as well as existing facilities and concentration of efforts and
limited resources of both government and private sector may be effected and
realized in order to generate foreign exchange as well as other tourist receipts.Such tourist zones shall consist of
substantially undeveloped areas the ownership of which may be partially or
wholly acquired by the Authority or whose existing owners may choose to
contribute their property into a consortium or in a new corporation in which
the Authority shall participate, which in any case shall be under the control
of the Authority as to the manner of development to be undertaken within the
zone.”

“Considering
that under the 1987 Constitution ‘[t]he civil service embraces all branches,
subdivisions, instrumentalities, and agencies of the Government, including
government-owned or controlled corporations with original charters’ [Art. IX(B),
Sec. 2(1); see also Sec. 1 of E.O. No. 180 where the employees in the civil
service are denominated as ‘government employees’] and that the SSS is one such
government-controlled corporation with an original charter, having been created
under R.A. No. 1161, its employees are part of the civil service [NASECO v.
NLRC, G.R. Nos. 69870 & 70295, November 24, 1988] and are covered by the
Civil Service Commission’s memorandum prohibiting strikes.”

[17]“SECTION 2. Declaration of Policy. -
It is the declared policy of the State to encourage higher levels of productivity,
maintain industrial peace and harmony and promote the principle of shared
responsibility in the relations between workers and employers, recognizing the
right of labor to its just share in the fruits of production and the right of
business enterprises to reasonable returns of investments and to expansion and
growth, and the accordingly to provide corresponding incentives to both labor
and capital for undertaking voluntary programs to ensure greater sharing by the
workers in the fruits of their labor.”

b)
“Labor-Management Committee” refers to a negotiating body in a business
enterprise composed of the representatives of labor and management created to
establish a productivity incentives program, and to settle disputes arising
therefrom in accordance with Section 9 hereof.”

b) In business
enterprises with duly recognized or certified labor organizations, the
representatives of labor shall be those designated by the collective bargaining
agent(s) of the bargaining unit(s).

c)
In business enterprises without duly recognized or certified labor
organizations, the representatives of labor shall be elected by at least a
majority of all rank-and-file employees who have rendered at least six (6)
months of continuous service.”

c)
If, during the existence of the productivity incentives program or agreement,
the employees will join or form a union, such program or agreement may, in
addition to the terms and conditions agreed upon by labor and management, be
integrated in the collective bargaining agreement that may be entered into
between them.”

c)
Any strike or lockout arising from any violation of the productivity incentives
program shall suspend the effectivity thereof pending settlement of such strike
or lockout: Provided, That the business enterprise shall not be deemed to have
forfeited tax incentives accrued prior to the date of occurrence of suchstrike orlockout, and the workers shall not be required to reimburse the
productivity bonuses already granted to them under the incentive program.Likewise, bonuses which have already accrued
before the strike or lockout shall be paid the workers within six (6) months
from their accrual.

xxx.”

[22]“SECTION
9. Disputes and Grievances.-Whenever disputes, grievances, or other matters arise from the
interpretation or implementation of the productivity incentives program, the
labor-management committee shall meet to resolve the dispute, and may seek the
assistance of the National Conciliation and Mediation Board of the Department
of Labor and Employment for such purpose.Any dispute which remains unresolved within twenty (20) days from the
time of its submission to the labor-management committee shall be submitted for
voluntary arbitration in line with the pertinent provisions of the Labor Code,
as amended.

The
productivity incentives program shall include the name(s) of the voluntary
arbitrator or panel of voluntary arbitrators previously chosen and agreed upon
by the labor-management committee.”

[34]These are found in Book IV of Executive Order
No. 292 whose applicable provisions follow:

“SEC. 1.
Declaration of Policy. -It is the
policy of the State that the Department of Finance shall be primarily
responsible for the sound and efficient management of the financial resources
of the Government, its subdivisions, agencies and instrumentalities.” (Title
II)

“SEC. 1.
Declaration of Policy. - The national budget shall be formulated and
implemented as an instrument of national development, reflective of national
objectives and plans; supportive of and consistent with the socio-economic
development plans and oriented towards the achievement of explicit objectives
and expected results, to ensure that the utilization of funds and operations of
government entities are conducted effectively; formulated within the context of
a regionalized governmental structure and within the
totality of revenues and other receipts, expenditures and borrowings of all
levels of government-owned or controlled corporations; and prepared within the
context of the national long-term plans and budget programs of the Government.”
(Title XVII)